Starting Saturday, the state will require Washington insurance companies to inform customers the reason behind all future rate hikes.
The state insurance commissioner's office announced its new rule this week, in the wake of insurance rate spikes and a reported buildup of consumer complaints. The transparency rule will apply to all auto and home insurance policies for Washington residents.
"If your insurance company is going to increase your premium, you have a right to know why," Insurance Commissioner Mike Kreidler said in a statement. "Hundreds of consumers, every year, have told us they are unable to get a clear answer from their insurance company about why they're being charged more. This is pretty basic information that should be available, and now it will be."
Last year, the state Office of the Insurance Commissioner approved a nearly 25% average premium increase for auto policies. That number was the highest increase the state has seen by a long shot in several years. In 2017, the state approved an increase of roughly 7%.
The new regulations will take effect in two phases: The first will go into place Saturday, and the second phase will happen in 2027.
Beginning Saturday, the state will require insurance companies to list a disclaimer on the first page of any renewal notices or billing statements that informs policyholders they are able to request more details about any premium increases. The notices must be written in a minimum of 12-point bold font and include contact information for the insurance company.
Insurance companies will be required to respond to any written information requests by policyholders (through postmarked mail or email) to deliver a "clear, concise statement, in writing, providing a reasonable explanation for the policy increase," the new rule reads.
Starting on June 1, 2027, phase two of the new transparency rule will take effect. Insurance companies will be required to send a notice to customers at least 20 days before renewing a policy with a rate hike equal or greater to 10%.
Insurance companies also will be required to ramp up the breadth of their rate hike explanations in phase two and list "the primary factors that caused the increase."
Those factors can include claims history, discounts, fees, surcharges, premium capping, base rate charges and demographic information such as the policyholder's age, credit score, gender, marital status and job.
For auto insurance, those factors can include a policyholder's driving record, the number of miles they drive, the number of drivers on their insurance plan and where they store their vehicle.
For home insurance, factors can include the property's age, location and value.
Northwest Insurance Council President Kenton Brine said insurers across the state have been preparing for the transparency rule to take effect for about a year. But insurance companies still have concerns about the new rule, particularly the second phase.
"Now we're talking about multiple pages of analysis provided to tens of thousands of insurance consumers every six months of renewal if their premium goes up," Brine said. "Hopefully, we'll see that (phase one) is an adequate amount of information for people to make informed choices, and we'll have a good discussion about whether or not phase two is necessary."
The state Office of the Insurance Commissioner encourages Washington residents with questions about the transparency rule to contact the state agency at (800) 562-6900.
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